Ethereum will transition from a proof-of-work platform to a proof-of-stake platform. We expect this transition, known as “The Merge” in the industry, to occur very soon. What is “The Merge”? Ethereum functions similarly to Bitcoin because a decentralized network of computers competing to solve mathematical puzzles is responsible for mining transactions. In exchange for solving the puzzle, the reward is new ETH coins. However, the process by which computers determine which transactions should be added to a block, known as proof of work, is extremely energy-intensive. As a result, Ethereum will likely switch to a consensus algorithm that consumes significantly less energy, allowing the network to be 99 percent more energy efficient. The term given to Ethereum’s new protocol is proof of stake. In proof of stake, transactions are validated by addresses that have staked — or pledged to a smart contract — a significant quantity of ETH. Those who staked more ETH receive a larger portion of the reward. Since the first blockchain launch in 2015, the Ethereum community has been working to transition to proof-of-stake. The Merge is one of a series of upgrades that will make Ethereum faster and less expensive to use. Ethereum’s downside is its long transaction times and high transaction fees. For example, during times of heavy congestion, simple $1 token exchanges on Uniswap can incur transaction fees of more than $50. The Merge is not th...
